If you’re in the process of purchasing your first home, chances are you feel a little unsure about how to go about it. You’ll probably seek the advice of family, friends, colleagues, or even experts… but guess what, they may not all be accurate. Falling for these might even lead to disappointment and discourage you from buying that property.
No one handbook tells you how to go about [probably] the biggest purchase of your life. Many resources will tell you one thing or another, but we’re here to set the record straight around misleading myths relevant to home buying.
Myth #1: “I have to put a 20% down.”
According to this resource, a median listing price in America is around $385,000—20% of it can be daunting for many people. What you need to know is that this percentage serves more as a guideline rather than a fact. On average, down payments on homes can go between 7-12%. If you have the funds available, it would be good to settle them. When making a sizeable down payment, you receive lower monthly payments as a result!
There are available grants and assistance programs to help you pool that money if you need it. Talk to a loan officer to assist you on what approach is best suited for your circumstances.
Myth #2: “I have too much debt on me.”
Most potential homebuyers are wary of having too much debt—but this should be the least of your concerns because it’s how the debt relates to your income that’s important. Before a mortgage lender offers up an approval, they’ll want to ensure your financial standing can provide you with room to purchase your dream home.
The debt-to-income ratio gives an overview of your monthly income towards settling any debt you have (i.e., credit cards, personal loans, etc.). Lenders prefer to see a debt-to-income ratio smaller than 36% to help you qualify for mortgage financing.
Myth #3: “I don’t have a good credit score.”
While having a good credit score will help you qualify for better mortgage rates, having less doesn’t mean you can’t. Should you turn to home loan advisors, you’ll see each may require various minimum credit score requirements. The higher your credit score, the more favorable the rate you can be eligible for, which will help you save on funds. If you don’t, there are a lot of avenues that can help you become a homeowner. It’s always important to remember, lenders are looking at your overall financial standing—not just your credit score alone.
Myth #4: “I can skip the home inspection.”
While this saves you a couple of dollars, skipping home inspection might bring headaches down the line. Home inspections are essential to uncover possible structural issues that you may not realize on your own. If you discover major problems through the home inspection, you might be able to negotiate the price you have to settle; or back out from the agreement without penalties. Home inspections are like a blanket of protection, ensuring you get the most out of the home for which you’re paying.
Myth #5: “I know closing costs will be hefty.”
Generally, closing costs can range from 2% to 5% of the home sale price. They’re settled at the very end when you are signing off all the final house purchase documents.
Spending this amount on fees alone may be a little shocking. To be safe, save up for the down payment amount, as well as the closing costs. If you end up spending less than this, at least you can put that towards home renovations or other financial responsibilities.
Myth #6: “I can solely rely on the advice my family and friends give because they’re more experienced than me.”
If your family or friends are experienced real estate agents or home loan advisors, then you may be able to rely on them for advice. Sure, they’ve experienced purchasing a home, but the market landscape can change. Previous processes used before may not have the same impact in today’s climate.
It is still advisable to work with an experienced advisor with expertise in real estate and the housing market. Of course, to find the best one, you’ll need to go through research and reviews to connect with one that can support you on your specific needs.
If you’re in the New Jersey area, Ultra Mortgage is a well-established and highly reputable mortgage lender that can guide you in making your dream home yours. For more information, contact us or give us a call today to see how we can make your home buying dreams come true.